My query is that I am ONLY seeing the state level boundaries.
Why is the union not giving me the union of the state and
district boundaries ?
It would help to know exactly the result you expect? Also maybe
abetter place to get help on overpass queries is the #osm irc channel

I was trying to plot the state boundary of Maharsahtra and the
district boundaries for the districts inside Maharashtra. That's the
result I was expecting.